Why 100% advance payment is safe in Ukraine? Why advance payment is safe in Ukraine

General overview.
Recently, we`ve been contacted by hundreds of entrepreneurs from the EU, Asia and North America, who want to buy different commodities from Ukraine. 95% of these buyers indicate in their inquiries that they accept only LC or BG. Because of these payment methods almost all inquiries are not even considered by Ukrainian producers and exporters. That is why we decided to explain to foreigners why 95% of Ukrainian exporters only accept 100% advance payment and why it is safe.

Monetary control in foreign trade exists only in post-Soviet countries, like Ukraine, Russia, Belarus and other countries of former USSR. According to the Law of Ukraine On procedure of payment in foreign currency the exporter is obliged to deliver the goods within 180 days of receiving advance payment from the foreign buyer. The law provides longer terms of delivery in such fields as aerospace, pharmacy, shipbuilding.
If the exporter doesn`t deliver the prepaid goods within 180 days, which is proved by customs declaration or it delivers inferior goods or doesn`t deliver all quantity of prepaid goods, indicated in supply contract, the exporter will be fined by the local tax office. Exporter will be obliged to pay 0,3% of the outstanding amount of undelivered goods FOR EVERY DAY OF UNDELIVERY! If you calculate the amount of penalty it is really huge. In addition, there is no any limit for this penalty.
The only reason to stop calculation of it is weather to ship to the buyer amount of outstanding/inferior goods or to return the sum of prepayment for the quantity of outstanding/inferior goods. A situation when you make advance payment and exporter refuses to deliver the goods to you is simply not possible in Ukraine, because in 180 days the exporter will have to pay a huge penalty.
It means that exporter is the most interested party to meet all its contractual obligations in a good faith; otherwise not only the foreign buyer may use contractual penalty against him, but also tax office may fine such exporter.

Remember that when you deal with Ukrainian exporters and producers, the foreign buyer is protected twice: first, by the contract and second by the law. It means that Ukrainian exporters who accept advance payment can become your hostage and you can force them to meet their contractual obligations, otherwise they may be fined by you and the government.
But be wary, this method of payment is safe only if your Ukrainian counterpart is a genuine and legitimate company. If it is a fraudster, even the guarantee from almighty god will not be safe!

If you require professional and timely advice to solve complex legal issues and achieve commercial goals, Marketplace UkrRos LLC is always ready to give you a hand. We enjoy good track record of advising internationally and domestically on a wide scope of commercial transactions and other business issues.
In order not to be hooked by fraudsters and cheated by dodgy contractors or prospective partners, check a business partner background at all times! Feel free to contact us through our web site Marketplace is able to help you check a counterparts background by acquiring information on companies, incorporated under Ukrainian jurisdiction. Getting detailed and accurate information on a partner's history and track record is vital for you to evaluate carefully the risks involved in any investment project.

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